The Health Care M&A Monthly: Pfizer Rejoins The Fray–

Makes Three Deals Worth $4.2 Billion In One Month

Since acquiring Wyeth last year for $68.0 billion, Pfizer (NYSE: PFE) has kept a relatively low acquisition profile, buying a biotech here, a generic pharma there, all for relatively small amounts. That changed this October when three transactions were announced with a combined price of approximately $4.2 billion. These three indicate how the biggest of the big pharmas—and, by extension, the pharmaceutical industry as a whole—is dealing with its dependence on small-molecule drugs and on blockbusters that are fated to lose their exclusivity in the very near future.

In its largest deal this month, Pfizer is acquiring King Pharmaceuticals (NYSE: KG) for $3.6 billion. Based in Bristol, Tennessee, King is involved in branded drugs and animal health; of particular interest to PFE is King’s franchise of painkillers, which include Avinza, the Flector Patch and the recently launched Embeda. On a trailing 12-month basis, King generated revenue of $1.65 billion, EBITDA of $392.0 million and net income of $87.0 million.
Under terms of the transaction, Pfizer is offering $14.25 in cash per share, a figure that offers King shareholders a 40% premium to the stocks’ prior-day price. The relevant acquisition multiples are 2.2x revenue and 9.2x EBITDA. This acquisition expands Pfizer’s portfolio of consumer drugs, particularly in the area of analgesics, or painkillers. In addition to its currently marketed portfolio, KG has a number of abuse-resistant pain products in development. The first of this generation to reach market is Embeda, an opioid pain product designed to deter abuse.
In its second deal, Pfizer is paying as much as $350.0 million to enter into a deal with Bangalore-based Biocon (BSX: BION) to sell insulin and insulin analogs to treat diabetes. Under terms of the agreement, PFE will pay BION $200.0 million upfront and up to an additional $150.0 million in development and regulatory milestones. Royalties will be paid on sales. For its part, Biocon will manufacture the drugs. This deal gives PFE worldwide rights to a biosimilar insulin, which is difficult to copy, making it resistant to generic competition. According to their plan, the drugs are to be rolled out first in emerging markets, then Europe, then the United States… Want to read more? Click here for a free trial and download the current issue today